Each curve represents a set of combinations of goods that give a specific level of utility. In this chapter we first explain what indifference curves are, and indicate their important properties. The slope of the indifference curve is the amount of y that the community will give up in exchange for more x without affecting community welfare, and in. A community indifference curve is an illustration of different combinations of commodity quantities that would bring a whole community the same level of utility. Such a diagram is known as an indifference map where each indifference curve corresponds to a different indifference schedule of the consumer. Indifference curve adopted the concept of ordinal utility instead of cardinal utility. Ordinal approach of utility ic indifference curves and mrs marginal rate of substitution. An indifference curve represents a series of combinations between two different economic goods, between which an individual. One of the basic assumptions of indifference curves is that the consumer purchases combinations of different commodities. Use of indifference curves in international trade uses the indifference technique so effectively that the basic theorems. Whats important is that the income effect is negative. An inferior good can still have indifference curves that bow inward convex to the origin.
In a community indifference curve, the indifference curves of all those individuals are aggregated and held at an equal and constant level of utility. The model can be used to describe any community, such as a town or an entire nation. A method of constructing community indifference curves journal. Indifference curves and marginal rate of substitution video khan.
Nature of scitovskys community indifference contours, 6. Community indifference curves have how many points of. It is like a contour map showing the height of the land above sealevel where instead of height, each indifference curve represents a level of satisfaction. Download citation community indifference curves the idea of a community indifference curve, as the term is commonly used, is due to scitovsky 1942. Chapter 3 the standard theory of international trade. The thesis of this paper is that when the indifference curve is concave to the origin, the optimal point on the budget line is not the corner solution on the highest most north eastern. According to it when a consumer is presented with a number of various combinations of goods, he can order or rank them in. If a series of community indifference curves is shown such that higher the indifference curve, higher is the level of satisfaction from combinations lying upon it and viceversa, that series of social indifference curves represents the community indifference map, which is shown in fig. Microeconomics, managerial economics, indifference curve, budget line related links. The use of community indifference curves is legitimate as long as the community preferences are welldefined, which requires certain assumptions on the preferences and incomes of the individual consumers. Community indifference curves show the different combinations of commodities that would provide a given amount of utility or satisfaction to an entire community.